Online retail turns 25, but physical stores are more relevant than ever

Online retail turns 25 this month – but the importance and relevance of brick-and-mortar stores is more relevant now than ever before…

Earphones. That is the first product I ever bought online, in the late 1990s. I remember being uncomfortable keying in my credit-card information and hesitating several times, before I went through with it. Fortunately, the earphones arrived safely, on schedule, and I had bought them for a fraction of the cost in-store (which is how I was lured into buying them in the first place!).

I can only imagine what it was like for that first customer, to purchase something from the first online retailer. It was on a Friday night, August 12 1994, an astonishing 25 years ago this month. Today alone, I ordered fresh groceries with an app on my phone and prepaid for a taxi to the office. Online transactions are today as natural to consumers as breathing. 

Traditional retailers have had it rough since the birth of e-commerce. We have all seen stores closing down, heard of retailers laying off sales associates, or big brands going bankrupt. Online retailers on the other hand, have leveraged their customer advantages of convenience and choice. 

Online players were the first in the retail business to understand the value of data to identify and play into shopping behaviors, leading to personalised shopping experiences. Even with aggressively launched customer-loyalty programs, it has been a challenge for traditional retailers to collect the same volume of data, with the precision or depth of online retailers. Plenty have also opened up shop online, but never with the same level of success as digital-born online retailers. In fact, this two-track strategy frequently created more complexity. 

The disruption of online transactions, along with consumers’ nonlinear shopping behaviour, has compelled most brick and mortar-oriented retailers to desperately figure out the ways to survive. You would think that this translates into the demise of traditional, brick and mortar retailers, right? But I’d like to remind you that the majority of retail revenue still comes from physical stores. And this trend is set to continue, especially in Asia Pacific, Japan & China. In fact, 88.1 per cent of retail purchases were still made in the real world last year (Source: Statistica, Flow solutions analysis). 

Online players like Alibaba and Amazon recognise the endurance of brick and mortal retail, which is why they have been investing heavily in penetrating into the physical world by acquiring companies, partnering with offline retailers, or launching new services to attract offline shoppers.

However, the winning formula for brick and mortar is vastly different from the strategies of the past, when retailing operations were simple and straight-forward: choosing a great location and improving merchandising capabilities. 

Instead, the future of retail centers around customer experience and how to improve on it, by leveraging business insights sourced via a variety of sources. With both a physical and an online presence, retailers have the potential to source and influence customers across multiple channels and touchpoints, refining or re-strategising based on their data points. 

What does this mean for brick-and-mortar oriented retailers, that already have a solid physical presence? It clearly indicates that they stand a chance to come out on top. No, they are not as technically savvy as online retailers, but they can certainly take advantage of their existing physical presence. 

With this in mind, retailers should contemplate two tactics that contribute to future success. They need to reconsider how they view their stores; as well as seek the right technology partner. 

Treasure troves of data

First, retailers must shift their perspective of their physical stores – from a transaction place to sell products to a platform for gathering offline data.

Brick and mortar shops truly are treasure troves of data. Imagine if you could figure out how many people walk by your store or figure out what interests people most in your shop window. What if you knew how many times customers pulled out a hanger from a clothes rack? What product they are doing price comparisons for on their phones? Do customers leave or stay when approached by a shop attendant? How many people try to visit the store outside of opening hours? How do factors like the weather affect shopping decisions?

Since data is a key asset, capturing this data is critical. And brick and mortar retailers that integrate their online presence with physical stores have the possibility of capturing even more data than online retailers. 

This is where brick-and-mortar retailers, with their offline shopping behaviour data, can come out on top. But to leverage this data, they need to digitise their physical spaces. This starts with the right technology infrastructure – including Wi-Fi access points, IoT sensors and/or tags. But it goes beyond hardware to ensuring that the collected data is clean and streamlined enough to create value, which can be particularly tough if the store includes sensors from different sources and vendors. 

Therefore, I always argue for a vendor-agnostic data platform layer that forms the foundation for providing tangible business insights. Since the same network facilitates the connection between the retailer and the payment companies, it is necessary, also, to include all-encompassing network security to prevent data breaches and stop ransomware in its track.  

Just imagine how powerful it would be to have clear visibility on how shoppers behave in your store.  Next, retailers can develop “personalised” services to maintain and attract more customers. If this sounds like the future, I am happy to tell you that this system is already in trials in large electronic stores in Japan and being piloted by supermarkets in Australia and many more. 


Brian Chung is director retail business development, Asia Pacific, Japan & China, at Cisco. 

Second, collaborating with an end-to-end technology partner. Retailers, by nature, are not tech companies. And yet the market requires them to be the tech savvy these days. This is retail’s biggest obstacle. I’ve seen leading retailers trying to internalise a variety of new technology capabilities in their organisation, but frequently efforts did not yield the expected outcomes. Instead, they resulted in more complexity or contributed to a negative attitude towards digitising. Retailers need a long-term technology partner for their digitisation journey who can make them move faster than market changes, understand their requirements and find the answers by connecting the dots across the ecosystem. They need a partner who is willing to fail together by taking mutual responsibility, and above all, who can infuse them with market-proven technology capabilities, helping them turn their ideas into tangible outcomes.

Any retailer that both takes advantage of their physical stores and partners well, can look forward to the next 25 years with confidence!


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